Borrower Joe has an existing loan that requires 15 more years of monthly payments of $1,004....
Borrower Joe has an existing loan that requires 15 more years of monthly payments of $1,004. He is considering refinancing the loan balance of $117.095.08 with a new loan at the current market rate of 5.675% for 15-year loans. Both the old loan and the new loan require 2 points plus $500 in origination fees. What is the NPV of the refinancing decision at an opportunity rate of 5.675%? Should Joe choose NOT to refinance his existing loan.
Homework Answers
Since, NPV of refinancing is negative, Joe should not refinance the Loan. In case origination fee of 2 points plus 500 is only charged once i.e. only on New Loan, refinancing can be considered. In that case NPV will be positive i.e. $ 1553.90
Add Answer to:
Borrower Joe has an existing loan that requires 15 more years of
monthly payments of $1,004....
The mortgage on your house is five years old. It required monthly payments of $ 1,422,...
The mortgage on your house is five years old. It required
monthly payments of $ 1,422, had an original term of 30 years and
had an interest rate of 9% (APR). In the intervening five years,
interest rates have fallen and so you have decided to refinance,
that is, you will roll over the outstanding balance into a new
mortgage. The new mortgage has a 30-year term, requires monthly
payments, and has an interest rate of 6.125 % (APR).
a....
The mortgage on your house is five years old. It required monthly payments of $ 1,422,...
The mortgage on your house is five years old. It required monthly payments of $ 1,422, had an original term of 30 years, and had an interest rate of 9 % (APR). In the intervening five years, interest rates have fallen and so you have decided to refinance long dash that is, you will roll over the outstanding balance into a new mortgage. The new mortgage has a 30-year term, requires monthly payments, and has an interest rate of 6.125...
please show all work! 8. *Eight years ago you borrowed $200,000 to finance the pur- chase...
please show all work!
8. *Eight years ago you borrowed $200,000 to finance the pur- chase of a $240,000 home. The interest rate on the old mort- gage loan is 6 percent. Payments are being made monthly to amortize the loan over 30 years. You have found another lender who will refinance the current outstanding loan balance at 4 percent with monthly payments for 30 years. The new lender will charge two discount points on the loan. Other refinancing costs...
Question 1 (1 point) Suppose a homeowner has an existing mortgage loan with these terms: Remaining...
Question 1 (1 point) Suppose a homeowner has an existing mortgage loan with these terms: Remaining balance of $220,000, interest rate of 6%, and remaining term of 8 years (monthly payments). This loan can be replaced by a loan at an interest rate of 5% , at a cost of 4% of the outstanding loan amount. You feel the appropriate opportunity cost to apply to this refinancing decision is 6%. What is the net present value (NPV) of refinancing, assuming...
A borrower purchased a property 15 years ago with a loan for $150,000 with monthly payments...
A borrower purchased a property 15 years ago with a loan for $150,000 with monthly payments for 30 years at 7% interest. Today, mortgagee wishes to sell the loan to an investor. If market interest rates are 5%, how much would the investor be willing to pay for the loan assuming the loan does not allow prepayment? a.) $75,000 b.) $126,196 c.) $168,646 d.) $179,460
ENGINEERING ECONOMICS Question 2 When interest rates drop, there are opportunities to refinance an existing mortgage...
ENGINEERING ECONOMICS Question 2 When interest rates drop, there are opportunities to refinance an existing mortgage by paying the up front expenses of refinancing and getting a mortgage at a lower interest rate. Whether it is worth doing so or not is a decision that confounds most people. Evaluate concepts of money time relationship principles that need to be considered to make such a decision. Suppose that the original mortgage is a 30 year loan for $200,000 at 8% annual...
The mortgage on your house is five years old. It required monthly payments of $ 1...
The mortgage on your house is five years old. It required monthly payments of $ 1 422 , had an original term of 30 years, and had an interest rate of 9 % (APR). In the intervening five years, interest rates have fallen and so you have decided to refinancelong dashthat is, you will roll over the outstanding balance into a new mortgage. The new mortgage has a 30-year term, requires monthly payments, and has an interest rate of 6.625...
The mortgage on your house is five years old. It required monthly payments of SEK 12,000,...
The mortgage on your house is five years old. It required monthly payments of SEK 12,000, had an original term of 30 years, and had an interest rate of 6.5% (APR). In the intervening five years, interest rates have fallen and so you have decided to refinance - that is, you will roll over the outstanding balance into a new mortgage. The new mortgage has a 30-year term, requires monthly payments, and has an interest rate of 3.5% (APR). (a)...
2.) Consider a fixed-rate mortgage with the following characteristics: loan amount is $133,000 with 30 years...
2.) Consider a fixed-rate mortgage with the following characteristics: loan amount is $133,000 with 30 years to maturity, an interest rate of 7.5% and monthly payments of $929.96. Assume the borrower decides to sell the collateral an get a new property. If the borrower prepays at the end of month 60, what is the amount outstanding on this loan at the time of prepayment? which of these is the answer? (show your work!): $110,145 $122,445 $125,841 $129,302 3.) Consider the...
Five years ago you borrowed $230,000 to finance the purchase of a $290,000 house. The interest...
Five years ago you borrowed $230,000 to finance the purchase of a $290,000 house. The interest rate on the old mortgage is 5.5%. Payment terms are being made monthly to amortize the loan over 30 years. You have found another lender who will refinance the current outstanding loan balance at 3.5% with monthly payments for 25 years. There are no prepayment penalties associated with either loan. You feel the appropriate refinancing cost is 5% of the new loan amount. a....
The mortgage on your house is five years old. It required
monthly payments of $ 1,422, had an original term of 30 years and
had an interest rate of 9% (APR). In the intervening five years,
interest rates have fallen and so you have decided to refinance,
that is, you will roll over the outstanding balance into a new
mortgage. The new mortgage has a 30-year term, requires monthly
payments, and has an interest rate of 6.125 % (APR).
a....
please show all work!
8. *Eight years ago you borrowed $200,000 to finance the pur- chase of a $240,000 home. The interest rate on the old mort- gage loan is 6 percent. Payments are being made monthly to amortize the loan over 30 years. You have found another lender who will refinance the current outstanding loan balance at 4 percent with monthly payments for 30 years. The new lender will charge two discount points on the loan. Other refinancing costs...
Question 1 (1 point) Suppose a homeowner has an existing mortgage loan with these terms: Remaining balance of $220,000, interest rate of 6%, and remaining term of 8 years (monthly payments). This loan can be replaced by a loan at an interest rate of 5% , at a cost of 4% of the outstanding loan amount. You feel the appropriate opportunity cost to apply to this refinancing decision is 6%. What is the net present value (NPV) of refinancing, assuming...
ENGINEERING ECONOMICS Question 2 When interest rates drop, there are opportunities to refinance an existing mortgage by paying the up front expenses of refinancing and getting a mortgage at a lower interest rate. Whether it is worth doing so or not is a decision that confounds most people. Evaluate concepts of money time relationship principles that need to be considered to make such a decision. Suppose that the original mortgage is a 30 year loan for $200,000 at 8% annual...
Most questions answered within 3 hours.
-
R2.84: There are 2 defective products in a production lot of 10.
An inspector randomly selected...
asked 1 hour ago -
Consider the following equilibrium system: COCl2(g) CO(g) +
Cl2(g) A 10.00 L evacuated flask is filled...
asked 1 hour ago -
1) What are the two distinct steps that one needs to perform
when developing a data...
asked 1 hour ago -
2) Write a C++ program that uses a class called “Degree” to
obtain the trigonometric
values...
asked 2 hours ago -
1. In eukaryotic cells the genomes of
&
asked 2 hours ago -
The standard enthalpy of propanol (C3H7OH) is -303.0 kJ/mol.
Compute both of the
gross and net...
asked 2 hours ago -
Why PWM using H-bridge for control motor speed is more power
effiecient than the linear amplifier...
asked 3 hours ago -
In 1999, Carly Fiorina famously said,"I hope that we are at a
point that everyone is...
asked 3 hours ago -
Individuals in a species of moth vary in wing color from white to
black, but all...
asked 3 hours ago -
The following standards for variable manufacturing overhead have
been established for a company that makes only...
asked 3 hours ago -
The United States government wanted to determine what proportion
of Americans approve of the current president,...
asked 3 hours ago -
2-N stone is dropped from the top of a cliff. The stone hits the
ground 3...
asked 3 hours ago